A Retailer’s Dilemma

Rolling Stone magazine gave it a glowing review of 4.5/5, applauding its musical ambition and folkish sentimentality. However, Sting’s fourth solo album Ten Summoner’s Tales will be remembered for much more than just the ex-Police frontman’s eclectic exploration of the themes of love and loss.

On 11 August 1994, Dan Kohn sold his copy of the album for $12.48 to a friend in Philadelphia, using data encryption software to securely send his details online to make the purchase. What seems like a usual transaction by today’s standards is now considered by many to be the first ever legitimate online transaction ever processed.

In just over 20 years, the growth of online retailing has changed consumer habits seemingly forever. The terms “click and collect” or “next day delivery” would have been alien concepts back in the mid-1990s, but are now prominent in consumer lexicons. The biggest proprietor of these concepts can also trace it roots back to 1994. Branded back then as Cadabra, Amazon is now the fourth most valuable public company in the world, generating $177.86 billion in revenue last year alone.

Amazon has revolutionised the way we shop, especially here in the UK, with 29.7% of our online spend going to the company. UK consumers are something of a trailblazer when it comes to shopping as our dense population, widespread internet access and strong infrastructure network make the country an ideal location for an online retailer. With 18% of our transactions now made online, compared to 12% in the US, the British high street has been feeling the pinch, particularly with consumers tightening their belts following the Brexit vote. With BHS having gone into administration in 2016, we have seen profit warnings from stalwarts such as Carpetright, Game and Tesco to name a few.

The latest casualty could well be Debenhams. After a disappointing Christmas period, the company is now shedding 25% of its store managers as it seeks to battle changing retail habits. Scrapping a total of 320 roles, the writing could be on the wall for bricks and mortar offerings. Debenhams has already tried to revamp its online presence with little success, seeing like for like sales fall 2.6% during the 17 weeks to Christmas.

The recent expansion of online retail is a trend set to continue. However, a recent survey compiled by a range of property groups has shown that growth will plateau and then advance at a slower rate by 2021. It would seem the pattern is going full circle as online retailers are now clambering to purchase physical space. A trend in the industry baptised as “showrooming” has been identified as the future of retail, where shoppers use a physical store as a chance to touch and feel the product before they buy it from the comfort of their own home. As Amazon seeks to build up its own bricks and mortar portfolio with the recent purchase of Whole Foods, the news will come as music to their ears. Just as it did to Dan Kohn’s friend, all the way back in 1994.

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